Law:

Section:

Section 2(1) of the Income-tax Act, 1961 - Agricultural income - Assessment years 1974-75, 1976-77 and 1977-78 - Whether income from sale of tender forms by assessee, engaged in cultivation of sugarcane, would be taxable income, inasmuch as it did not partake of character of agricultural income being neither derived from land, nor incidental and intimately connected with agricultural operations - Held, yes Facts The assessee was a State Government undertaking, engaged in cultivation of sugarcane. The amount received by it on the sale of tender forms in the assessment years 1974-75, 1976-77 and 1977-78 was included by the ITO in its taxable income. The assessee's contention that the said income was closely connected with the agricultural operation and, therefore, was not taxable, was rejected by the ITO. On appeal, the Commissioner (Appeals) opined that the receipts arose from a single substantial activity of the assessee which was agricultural in nature and so could not be brought to tax. On further appeal, the Tribunal held that the said receipts did not partake of the character of agricultural income and was, therefore, taxable. On reference: Held Broadly stated, in order to come within the definition of 'agricultural income' the amount received should be the rent or revenue derived from land which is situated in India and is used for agricultural purposes. The receipts by the assessee by way of sale of tender forms did not partake of the character of agricultural income, in the light of the above definition, as such receipts had nothing to do with agriculture. The connection with the agri-cultural operation of such income was also very remote. It also could not be considered that the sale of tender forms was incidental and so intimately connected with the agricultural operations so as to make it part of the agricultural operations. Therefore, the amount received by sale of tender forms was not agricultural income and was taxable. The order of the Tribunal was, thus, upheld. Cases referred to Fr. Ephrem v. CIT [1989] 1 KLT 256 (Ker.) and CIT v. Raja Bahadur Kamakhaya Narayan Singh [1948] 16 ITR 325 (PC). U.K. Ramakrishnan for the Applicant. P.K.R. Menon for…

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